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World War II and the US Economy: The US Economy Before, During, and After the War

Updated on April 2, 2015
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The topic of this term paper is World War II and the US economy. This paper will expand on how World War II changed the contours of the nation’s economy. It will begin by evaluating the nation’s economy prior to the war and how the Great Depression affected it and the people. It will then expand on how the war was the driving force that pulled the nation out of the Great Depression and created one of the country’s most expansive economic periods in its history. Lastly, it will explain how the war changed the economy. This paper will focus on the industrial and agricultural aspects of the economy before, during, and after the war.

In a report pertaining to the statistics of the economy given to the senate in 1934:

It showed that between 1929 and 1932 national income had dropped by more than 50 percent. Incomes in manufacturing had dropped by 70 percent, and incomes in construction had dropped by more than 80 percent. Government was the only industry that had grown over the period. Although the Federal Government remained relatively small—Federal tax receipts claimed only 3 percent of GNP in 1932—Federal, state and local governments accounted for 14 percent of income.1

According to this report, the majority of the nation’s sources of incomes had decreased drastically as the depression progressed and worsened. Before the United States became involved in the war, its economy had become stagnant and early 20th century Americans found that their incomes had decreased drastically as well. As industries observed their incomes decreasing, they were forced to cut employment adding to the already swelling numbers of unemployed. Because the number of unemployed grew, fewer people were able to make purchases which further decreased industrial incomes and worsened the depression. The country was in a vicious cycle.

A product of the economic downturn that occurred during the transition between the 1920s and 1930s was a dangerously high level of unemployment. What stands out most during the Great Depression, the period before World War II, was that the unemployment rate had begun to increase as the country’s economic output began to decline. One source says:

“the economy descended from essentially full employment in 1929 when the unemployment rate was 3.2 percent into massive unemployment in 1933 when the unemployment rate reached 25 percent. The first question is why was there such high unemployment in 1933. The answer is that the economy was not producing as much output as it was capable of producing with full employment of the labor force. It was not producing as much as it could because it could not sell that amount.”2

Because of the vicious cycle the country’s economy was experiencing, the goods industries were manufacturing could not be sold because they were forced to fire large portions of their work force, a work force that would have potentially purchased the very goods that they helped to manufacture. Before World War II, the nation’s economy was stagnant because industries could not sell the goods that they were manufacturing and people could not afford to buy them.

Although not caused by the Great Depression, the farming crisis in the Midwest, specifically the Dust Bowl, helped to aggravate the already dire economic situation of the country. Farmers across the Midwest witnessed as their once fruitful farms vanished into arid plains of dust. According to one source, Utah was one of the hardest hit states of the Depression, especially for farmers. For Utah Farmers, “Between 1929 and 1933 Utah's gross farm income fell nearly 60 percent. Season after season individual farmers suffered from the miserably low prices they received for their products, and it made little difference what they grew or raised; they considered themselves lucky to sell their products for enough to meet their costs of production.”3 A common theme amongst farmers across the country was that they could not raise enough revenue on their goods to continue growing more and sustaining their livelihoods on their farms. Farmers all over the country faced foreclosures as they could no longer pay for their land and were forced out of the countryside and into the cities in hopes of finding employment in an already saturated market for workers. Their plight was similar to the plights of laborers who could not find work in industries to offer their services, only adding to the level of unemployment and further cutting the nation’s level of income. As World War II drew closer to home, the country prepared for war and found that the industrial and agricultural demands of war proved necessary to pull themselves from the worst depression in the nation’s history.


Source

As the country prepared for war, President Roosevelt requested that the nation’s defense spending increase drastically to support the country’s military needs should it find itself called to battle. In a report that describes military spending before and leading up to the war, it reads:

In 1940, defense expenditures were more than $1 billion, about 14 percent of the budget. In his January 1941 budget message, Roosevelt asked for $25 billion in defense expenditures, 62 percent of the budget, reflecting “a world at war.” In his January 1942 budget message, President Roosevelt asked for $53 billion for defense, 90 percent of the budget, reflecting “a nation at war in a world at war.1

Although the nation had begun to experience an economic upturn with the help of Roosevelt’s New Deal, his plan was not enough to pull the nation out of the Depression completely. However, the required expenditures for war were. The government seized control of industries and manufacturing plants and converted them so that their machinery and manpower would be used to produce war machines and other military equipment. As the demands for these supplies increased, people found a safe haven in war labor and the level of unemployment decreased.

An aspect of the economy that World War II changed, besides the decreasing level of unemployment, was that it allowed for women and minorities to work in areas that they were once barred from. The war had created such a gap in labor that the government was forced to open industrial and manufacturing jobs to both women and minorities. According to one source describing the nation’s economy during World War II and women’s and minorities roles in it, “The war virtually ended unemployment in America. The need for workers led manufacturers to hire women, teenagers, the aged, and minorities previously excluded by discrimination from sectors of the economy. Plentiful overtime work contributed to rising wages and increased savings.”4 The demand for labor during World War II occurred because the military’s demand for more resources spurred industrial expansion to accommodate their needs. People found employment more easily than they could during the Depression and for the first time in a long time were able to accrue savings to buy more goods, expanding the economy even more. World War II had pulled the nation out of the Depression and offered millions of people the opportunity to use their skills to earn money and finally make a respectable living once again.

Similarly to how the government took control of the industrial sector of the nation during the war, they also took over the agricultural sector. By protecting farmers through legislation and saving them from the draft, the government was attempting to create a relationship between farmers and the US government so that they could purchase large amounts of food products to feed soldiers in Asia and Europe. For example in Maryland, “The state Extension Service established farm cooperatives where farmers could share or rent farm machinery, and the federal Department of Agriculture created a State Agricultural War Board to supervise labor practices, establish crop goals, and promote maximum farm prices.”5 The goal was to create an efficient farming system to match the efficient industrial-war machine that the government had established. The industrial sector was not alone in receiving a boost during the war. The agricultural sector saw its gains increasing as the demands of war spurred them on. One source on agricultural expansion states that, “Farm production increased 40 percent during the war, the value of land and buildings, 52 percent, farm machinery, 95 percent, and farm income, 138 percent.”5 World War II changed the economic landscape of the nation industrially and agriculturally in ways that the President Roosevelt’s New Deal could not. The unemployment rate dropped dramatically and people found themselves in need by industries for their labor. Jobs became easier to find and began to pay higher wages. People further spurred economic growth by purchasing more goods during the war. The country transitioned from experiencing a vicious, negative economic cycle to a positive, expansive economic cycle.

Even after the war the country’s economy continued its progress and offered its citizens and returning soldiers a lifestyle they had never experienced before. The change between lifestyles before and after the war must have come as a pleasant surprise to early Americans as they found employment opportunities plentiful and prices on necessary goods, such as food, water, and clothing, dropping to normal levels. An article on the Library of Congress’s website states:

Building on the economic base left after the war, American society became more affluent in the postwar years than most Americans could have imagined in their wildest dreams before or during the war. Public policy, like the so-called GI Bill of Rights passed in 1944, provided money for veterans to attend college, to purchase homes, and to buy farms. The overall impact of such public policies was almost incalculable, but it certainly aided returning veterans to better themselves and to begin forming families and having children in unprecedented numbers.6

The GI Bill of Rights continued the push by government to take an active role in the welfare of its citizen’s wellbeing. The GI Bill speaks to how well the economy was doing after the war. The government was able to provide housing and college education for returning soldiers so that they could give themselves a chance to mold themselves into successful civilians.

A sign of a healthy economy is an expanding and lucrative housing market. The period after World War II saw a dramatic boost in home ownership because of the increased levels of income people experienced and also because of the GI Bill. Whereas before the war people moved from rural areas to urban areas in search of employment, after the war, people began to move out of urban areas and into newly created suburban neighborhoods. In a housing census document, it states, “The post-World War II surge in homeownership was remarkable. A booming economy, favorable tax laws, a rejuvenated home building industry, and easier financing saw homeownership explode nationally, topping 60 percent in just two decades…”7 For the first time in a long time, Americans found themselves in financially stable conditions. The post-war economy created a medium in which people would more than just survive in it; they would thrive.

Along with dramatic changes in industry, the economy, and lifestyles, the agriculture sector witnessed dramatic changes as well after World War II. The need for corporate and industrial workers continued to grow after the war had concluded so people continued to file out of the countryside in search of better paying jobs. The agricultural sector gained in efficiency and productivity, however. Although the number of farms and farmers decreased, new technology and farming methods pushed the agricultural sector to new heights after the war. A USDA source reads:

Following World War II, technological developments occurred at an extraordinarily rapid pace. Advances in mechanization and increasing availability of chemical inputs led to ever-increasing economies of scale that spurred rapid growth in average farm size, accompanied by an equally rapid decline in the number of farms and in the farm and rural populations.8

This change completely altered the face of the nation. What was once a farming country suddenly became the most industrialized country in the world. This change altered the lives of many Americans after the war. People found themselves working fewer hours on farms and more hours in a corporate or industrial environment. Corporate/industrial work offered employees new opportunities for healthier, safer lifestyles, especially considering that corporations and businesses could potentially offer benefits and insurance. After the war, the private, public, and agricultural sectors were booming with workers.

Before World War II, the US economy was in dire need of fixing. The country was experiencing the worst depression of its history and although President Roosevelt attempted to ameliorate the situation through his New Deal programs, he was ultimately unsuccessful in pulling the nation from out of the depths of the depression. The economy began to change course, however, during the war as the country mobilized. Roosevelt’s government took control of major industries and converted them to manufacture war machines and supplies. This change required a demand for laborers who could manufacture these war machines and supplies efficiently and quickly. A population that once found itself struggling to find work suddenly found itself in demand for their labor. As the war progressed, people were able to accrue savings and invest their money in manufactured goods, savings accounts, and homes. This helped to boost the economy further. After the war, the face of the nation had changed entirely. America became the most industrialized nation in the world and its citizens continued to file out of the countryside and into urban and suburban areas. Legislation such as the GI Bill of Rights helped returning soldiers establish themselves in the country’s new way of life. It was in this stability that America found continued successes economically, socially, and agriculturally.

An aspect of post-World War II life was the expansion and development of suburbs.
An aspect of post-World War II life was the expansion and development of suburbs. | Source

Notes

  1. Marcuss and Kane, "U.S. National Income and Product," U.S. Bureau of Economic Analysis.
  2. "The Great Depression of the 1930s," San José State University Department of Economics.
  3. McCormick, "The Great Depression," Utah History to Go.
  4. "The Home Front," The National World War II Museum.
  5. "Maryland Farms During World," Teaching American History.
  6. "The Postwar United States," Library of Congress.
  7. "Historical Census of Housing," United States Census Bureau.
  8. Dimitri, Effland, and Conklin, "The 20th Century Transformation," United States Department of Agriculture

Bibliography

"AMERICA GOES TO WAR:." The National WWII Museum. N.p., n.d. Web. 06 May 2014. <http://www.nationalww2museum.org/learn/education/for-students/ww2-history/america-goes-to-war.html>.

"Census of Housing." Historical Tables. N.p., 31 Oct. 2011. Web. 07 May 2014. <https://www.census.gov/hhes/www/housing/census/historic/owner.html>.

Marcuss, Rosemary D., and Richard E. Kane. U.S. National Income and Product Statistics. US Bureau of Economic Analysis. N.p., Feb. 2007. Web. 6 May 2014. <http://www.bea.gov/scb/pdf/2007/02%20February/0207_history_article.pdf>.

"Maryland Farms During World War II." Teaching American History in Maryland. N.p., n.d. Web. 07 May 2014. <http://teaching.msa.maryland.gov/000001/000000/000054/html/t54.html>.

McCormick, John S. "The Great Depression." The Great Depression. N.p., n.d. Web. 07 May 2014. <http://historytogo.utah.gov/utah_chapters/from_war_to_war/thegreatdepression.html>.

"Postwar United States - American Memory Timeline- Classroom Presentation | Teacher Resources - Library of Congress." Postwar United States - American Memory Timeline- Classroom Presentation | Teacher Resources - Library of Congress. N.p., n.d. Web. 05 May 2014. <http://www.loc.gov/teachers/classroommaterials/presentationsandactivities/presentations/timeline/postwar/>.

"The Great Depression of the 1930s and Its Origins." The Great Depression of the 1930s and Its Origins. N.p., n.d. Web. 06 May 2014. <http://www.sjsu.edu/faculty/watkins/dep1929.htm>.

United States of America. United States Department of Agriculture. Economic Research Service. The 20th Century Transformation of U.S. Agriculture and Farm Policy. By Carolyn Dimitri, Anne Effland, and Neilson Conklin. N.p.: n.p., n.d. Web. 7 May 2014. <http://www.ers.usda.gov/media/259572/eib3_1_.pdf>.

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    • someonewhoknows profile image

      someonewhoknows 

      4 years ago from south and west of canada,north of ohio

      War expenditures certainly boosted the U.S. economy as far as economic output in the manufacturing sector of the economy and still does. Munitions manufacturers have made money selling guns etc... overseas as well as to our own military and still do I believe. War's have always been funded by banks both foreign and domestic despite who wins or loses. The banks make out like bandits .George Bush Sr.'s father ran a bank in the U.S. that did business with the Nazi's during world war two until the bank was dissolved by selling the assets of the bank .Two million of which went to George Bush Sr.'s father which was used to create an oil company called Zappata oil that the Bush family owned.

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